Illicit financial flows thwart human rights and development in Africa

PHOTO/Oxfam

by IMANI COUNTESS

The Universal Declaration of Human Rights turned 70 on
12 December and governments and civil society organisations around the
world were commemorating the day with a range of activities. However,
the threat of illicit financial flows to the respect of human seems to
have been forgotten on that day.

The
United Nations launched a global campaign earlier this year to engage
audiences to promote understanding and to reflect upon the ways that
everyone can stand up for human rights. The Declaration has been a
global beacon for Africans fighting against colonialism and for
inclusive economic equality and sustainable development.

They stand as aspirational goals for nations, and standards that
nations are duty-bound to uphold and promote. But, what if despite your
country’s commitment to uphold these and other fundamental freedoms,
every year it was robbed of the financial resources necessary to promote
and protect rights?

This is the case for most nations in Africa where Illicit financial
flows (IFFs) rob countries of US $60-100 billion [some reports say more
than double this figure] each year; losses that in many countries exceed
foreign direct investments and development assistance. Funds that
could be used to secure basic economic and social rights, for example
the rights to social security, decent work and human dignity, are
instead held in secret tax havens for the benefit of corporate elites.

In 2015 the African Union’s Economic Commission on Africa released Illicit Financial Flow: Report of the High-Level Panel on Illicit Financial Flows from Africa. The
report, generally known as the Mbeki Report, after the panel’s chair,
former South African President Thabo Mbeki, defines IFFs as “money
illegally earned, transferred or used,” a definition that includes money
laundering, tax abuse, market and regulatory abuse, along with
practices that ‘go against established rules and norms, including legal
obligations to pay tax.”

Some 30 percent of IFFs are attributed to criminal activities, and
five percent to corruption. The panel determined that 65 percent is
attributed to commercial, or business activity. The most prevalent
method of commercial theft is the practice of trade misinvoicing, where
companies report export values to the developing countries that are far
below their actual worth, which results in a reduction in corporate
income taxes, customs duties, and value added taxes.

Nigeria, Africa’s most populous nation and its largest economy, lost
US $2.2 billion in 2014, which according to Global Financial Integrity
(GFI), a Washington, DC-based think tank, was equal to four percent of
total government revenue, resources that could have been used for
investment in education, health or to address the persistent problem of
government wage theft.

Nearly 30 out of Nigeria’s 36 states are unable to pay their workers
on time. According to Working for Peace in North-East Nigeria, a
September 2018 report by the Solidarity Center, a US-based international
labour organisation, medical professionals caring for internally
displaced victims of Boko Haram are paid their government wages
irregularly, despite the fact that they, along with teachers and civil
servants, are targeted and killed by the extremist group.

Ghana loses nearly US $1.4 billion a year to IFFs. As monies owed to
Ghana left the country, it borrowed US $930 million from the
International Monetary Fund (IMF).

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